Kelkar committee report

f. Undertake data-mining of ITRs and TDS returns to-
i. identify all deductors who have claimed to have deducted the tax but
have failed to remit the same to the account of the Central
Government. Enforce collection of such unpaid amount; and
ii. identify all taxpayers who have failed to pay to self-assessment tax
and enforce immediate collection;
g. Since there is no interest liability if the shortfall is less than 10 percent of
the total liability, there is a tendency to defer payment of advance tax. This
tendency is more pronounced when the cost of borrowing is high. In order
to discourage taxpayers from deferring payment of advance tax, identify
all cases where self-assessment tax has been paid or payable and take steps
to prevent deferment of advance tax.
h. Amend the provisions of all tax laws to charge interest at rates which
reflects the market rate of interest to the defaulters and a penalty for such
default 4 ;
i. TDS administration should be re-engineered to optimize efficiency and
minimize leakages. In this regard, a notification no S.O. 858 (E) dated 25 th
March, 2009 streamlining the compliance management of TDS was issued
but later withdrawn since the tax administration was not prepared to
implement. Since more than three years have elapsed, the notification
should be re-issued;
j. The Income Tax Department should immediately set-up a separate
Directorate of Risk Management for designing a robust risk management
system which will improve the efficiency of the tax administration and
enhance transparency;
k. Non-issue of refunds is a constant source of grievance for taxpayers. When
tax administration issues refund, it inspires taxpayers’ confidence in the
tax administration. Taxpayers err on the side of revenue and pay excess
tax. This has a positive effect on compliance. Therefore, all pending
refunds should be issued at the earliest. This will also improve liquidity of
4 For example, the market rate of interest for defaulting companies is generally as high as 18 percent to 20
percent. If we assume a penal component of 4 percent, the interest rate for default in payment of tax should be in
the range of 22 percent to 24 percent.
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